How to provide free shipping during your Kickstarter campaign?
Decrease your shipping costs and provide your backers with free shipping.
June 14, 2019
Decrease your shipping costs and provide your backers with free shipping.
June 14, 2019
Preparing and planning your Kickstarter is a key factor in ensuring success for your campaign, but a successful campaign isn’t just about reaching your targeted pledge goal. It means getting all your rewards to your backers' doorsteps on time, and in order to do so, you’ll need to prepare your shipping strategy as early as possible, especially if you want it to be free of charge for your backers.
One of the most common mistakes made by creators is not taking into consideration shipping and fulfillment during their pre-launch phase. This leads to major problems during the shipping and fulfillment process of the rewards and thus can result in many unexpected costs, delays on delivery, fulfillment issues and potential overcharges for backers.
The perfect example to illustrate these problems is the story of Podo:
Podo launched on Kickstarter in September 2016 with the goal of shipping by December. The creators set their goal to $50,000 but ended up exceeding it to reach $761,130.
A real success you may say, well it’s not that easy since even after 2 years, Podo’s team failed to ship all the rewards to their backers. According to Eddie Lee, the president of Podo Labs, the major issues they faced were related to the product’s supply chain but if you wanna know more about Podo’s story, check Ashley Carman’s article on why Kickstarter products take so long to ship?
Do you plan to ship all your products yourself? Or are you going to outsource this process to a logistics provider?
While shipping all the products by yourself is great and cost effective when you have just a few rewards to send, it can result in huge unexpected costs when shipping large volumes of rewards to backers. It also requires a big space to store all your products and most of all, it is time and effort consuming. That’s why if you plan to reach a considerable number of backers, my advice would be to talk to a logistics provider. Check our previous article, if you wanna know more about what are the factors to consider while choosing a logistics provider.
When you’re designing and manufacturing the product, it is important to keep logistics and shipping in mind especially when it comes to size, weight, and dimensions.
For example, in many countries, if your product’s thickness is 30mm or less, you can then ship your product with the postal network in a letter without having to put it in a box. Also if a parcel weighs less than 2kg and its dimensions Length + Width + High measure less than 900mm, each side measuring less than 600mm, it can qualify as a “packet”, which allows you to send it by the international postal network. Postal services offer lower prices which can be a really good opportunity for you to be more cost-effective and to gain margins.
So if you’re designing a really small product and your product’s thickness is just a bit bigger than 30mm, you should really consider redesigning it to reduce the size and thus cut some shipping costs.
One of the most important aspects of planning is cost estimation. It helps you determine how much money you’ll approximately (there are always some unexpected expenses) spend in every area of your campaign like the marketing activities paid ads or the manufacturing cost of your product. When it comes to shipping costs, you’ll need to know the exact weight and size of your packages since many carriers and logistics providers calculate the costs based on either the weight or the dimensional weight.
Dimensional weight (also known as volumetric weight) reflects the package density, in other terms, it is the amount of space a package occupies in relation to its actual weight. It uses an estimated weight that is calculated from the length, width, and height of a package. It is used by carriers and postal services as a shipment pricing method. Once obtained, the dimensional weight is compared to the actual parcel weight, the shipping price is based on the bigger one of the two.
To avoid all unpleasant surprises at billing, the right calculation of volumetric weight is essential if applied by the carrier. In order to compare your parcel dimensional weight with its real weight, you have to divide your parcel total volume by the volumetric coefficient.
Here’s a small example to help you understand better:
Your parcel is about 40x30x20cm, its weight is 2kg and the carrier dimensional coefficient is 5000
- 40*30*20= 24000
- 24000/5000= 4,8
4,8 being bigger than 2, the weight used for transportation will then be 4,8 kg instead of 2 kg.
Knowing the exact dimensions of your product will help you estimate your shipping costs and that will help you later when you set your reward pricing, to cover up all costs and make sure to keep a certain profit margin.
The location of your manufacturer, your warehouses and your backers play a big role in the definition of your shipping and logistics processes. Even if you have just a small influence for the latter; selecting a good location for your manufacturer, warehouses and fulfillment center can be a real game-changer in your campaign.
One popular strategy used by many creators who manufacture their products in China is to select different warehouses and fulfillment centers all around the world, from where they’ll ship their rewards to backers. To illustrate, you can select a warehouse in Europe, to cover the storage, fulfillment, and shipping to all your backers in Europe. You can select another one in the United States to cover all these activities within the North American territories.
The great thing about shipping from within these territories is that backers don’t have to pay customs fees. You pay custom fees and import taxes when importing your product in the zone, and you pay them in bulk on the manufacturing price, so at the end of the day you gain 2 advantages: First, you pay lower taxes, second, the backer experience is better as they don’t have to worry about taxes. Regarding backers from other parts of the world, you can use 2 different ways to charge them, but we’ll go into more detail in the next paragraph.
Because of the trade war going between the USA and China, the US has applied new customs fees up to 25% for certain products coming from China (board games for instance), so make sure to double check that your product isn’t on the list, and if it is we advise you to review your strategy according to these changes.
Another important aspect to consider is the international shipment and all the costs that come with it. Import taxes, customs duties, value-added taxes and handling fees (fees that you pay to carriers for handling customs clearances for you). This applies only when you do cross border shipping, but if you deal with the tax ahead, final customers won’t be concerned by that. These are really important costs to consider especially when creating your reward pricing policy as it will help you define how you’ll charge your backers.
The 2 most common ways to handle the fees are the DAP or DDP:
1. DAP: Delivery at Place
Here, end customers need to pay the customs fees upon pledge arrival before being able to collect their parcel. The selling price should be free of VAT.
2. DDP: Delivery duty paid
Here, the sender (you) pays the customs fees in advance to the carrier. End customers collect their parcel without paying any additional fees in arrival. In this case, you can add VAT to the selling price.
Now when it comes to which one you should use, it all depends on your pricing strategy.
When it comes to your pricing policy, make sure to take into consideration all the different costs we’ve mentioned earlier. You can opt to offer free shipping to your backers but in this case, you’ll decrease your margins or you can choose to include the shipping and customs fees in the rewards pricing. These aren’t the only options you have, as you can think outside of the box and design another pricing strategy. A good example to illustrate is what Kill the Unicorns did during their campaign. They decided to sponsor part of the shipping costs to all their backers. The picture below summarizes their strategy perfectly.
This strategy helped Morning (the company behind Kill the Unicorn) reduce costs for their backers and provide them with fair shipping, whatever the region they live in.
As already mentioned in our previous article: The 4 best shipping strategies for your e-commerce, free shipping is a great way to provide a good experience to your customers (in this case, backers) and you can use it as a promotional tool to attract more people, but (yes, there’s always a but) free doesn’t mean free of cost as you’ll still need to ensure your rewards get to your backers’ doorsteps. In order to do so, you’ve got many options and we’ve selected some of them that we believe can help you provide the best experience to your backers while still ensuring to make a profit.
As said earlier, small products can be shipped with postal networks which are way cheaper than other logistics providers. So if your product has small dimensions you could consider offering free shipping to your backers. Its costs will be at your expenses but you can use free shipping as a promotional tool and thus gain more backers.
To illustrate, let’s imagine you’re running a campaign about this amazing new connected wallet, it is small and doesn’t weight much. It costs around $40, and your margin is about $25. Its shipping costs may vary between 5$ and $10. Providing your backers with free delivery will reduce your margin, but you will be able to make up for it with the volume of pledges by attracting more people.
As we’ve mentioned earlier, many creators choose to locate their fulfillment centers in Europe and the US, in order to distribute the rewards to their backers in these zones without paying too much.
Knowing that around 70 or 80% of backers are from Europe and US combined, you can offer free shipping to the ones living in these zones which won’t cost you much since you’ll be shipping locally and you’ll pay the import tax in a bulk. Regarding backers from other parts of the world, you can choose to sponsor them the same amount as the ones in Europe and the US (like the Kill the Unicorns folks did), and they’ll have to pay the remaining fees. This is a fair way to offer free shipping for most of your backers and lower costs for the rest of the backers.
Another good strategy is to offer free shipping for people that choose rewards with many products. One backer takes more product, resulting in additional margin for you and the shipping price increase will not be proportional to this margin increase, it will be much lower, giving your more liberty to offer the shipping costs. You can also choose to partner with specific shops in big cities, where you ship everything in bulk and your backers will just need to collect them. Shipping in bulk will let you decrease your shipping costs and give a better experience for your backers.
Free shipping can be a real game changer, you can use it as a promotional tool to attract more backers and at the same time provide them with a better experience.In all cases, you’ll need to use your cost estimation and shipping planning to clearly define your pricing strategy and make sure to avoid any unpleasant surprise to you and your backers.
In conclusion, choose the method that best fits with your predictions of the aforementioned factors but most importantly the methods that are fair to your backers because ultimately they will decide whether or not your Kickstarter campaign will be successful.
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